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Shocking as it may be to the economists populating this blog’s demented comment section, CBs know what they’re doing. It was central bank actions which stopped a financial crisis from becoming a depression ten years ago. Since then these dudes have – despite profligate, misguided politicians and quixotic, volatile voters – brought us to this point. The world is growing again. Inflation’s back. Companies are making big coin. Europe survived. We crept to the edge, were pulled back, and survived.

The bankers did it by dropping rates, adding massive stimulus, flooding the world with credit, restructuring debts and coordinating monetary policy. Yeah, low rates brought big borrowing and inflated assets (like houses in Toronto), but debt-snorfling buyers were equally to blame.

The bottom line: it worked. Now we’re on the other side. Rates, inflation, profits and growth up. Borrowing and asset values down. Despite the run-up in debt of all kinds (and Trump), there is no crash on the horizon and no depression. Not even a recession. Those sitting in cash will once again fall behind. You should be fully invested – but keep it balanced and diversified.

By the way, do you know what a central bank is? What’s in the vault?

The Bank of Canada came into being almost a century ago (1935) when the world was struggling to shrug off a depression which threw 30% of workers onto the street. The need to try and organize the economy better was obvious, since politicians had royally screwed things up (with a trade war, ironically).

So our central bank is a publicly-owned Crown corporation and operates (thank God) independently from Parliament. It issues the only legal money (other than Canadian Tire, of course), sets interest rates and has a mandate of stabilizing the currency, moderating inflation and supporting the economy. Yes, just like this blog.

Lately our CB has been trying to wean people off the cheap mortgage and LOC rates that turned crap houses into million-dollar mansions and pickled the entire nation in debt. It’s a slow process. Move too fast, jack rates too much, and things slide. Go too slow or fall out of step with the Fed (the American CB) and inflation roars as the dollar swoons. Nonetheless, interest rates will be normalized even if many over-extended families are squished in the process. C’est la vie. You were warned.

By the way, what’s in our central bank? What do we own?

The Bank of Canada’s assets are called ‘reserves’ and comprise a bunch of stuff – some tangible assets, some on loan to the chartered banks plus credits with other CBs. These reserves are the things which (along with the government’s power to tax) actually back our currency. Long ago when men were men, shaved in streams, had callouses and no Netflix, central banks kept piles of rocks (gold) in order to give paper money value. But that ended decades ago. In fact, our CB now holds no gold whatsoever, having sold the last of it three years ago.

Currently the Bank of Canada is sitting on just over $91 billion, or $69.3 billion US. Two-thirds of that amount is held in American dollars, ($47.5 billion), with the rest in Euros ($14 billion), Sterling ($7 billion) and yen ($1 billion). As mentioned, gold = zero.

How do we rank in the world?

Not bad. Canada has the 38th biggest population on the planet, yet the Bank of Canada is No. 28 when it comes to reserves. Compare that to the US – whose central bank ranks 21st in terms of assets – despite America being the third most-populous place with the loudest leader.

Number one? By an incredible margin, it’s China – sitting on over $3 trillion in CB assets. But the real winner? Switzerland, baby. The little spec of a place is the 98th biggest country and yet has a central bank stuffed with $757 billion US worth of assets – ten times our level – and number three in the globe. No hat, big cattle.

Lessons: these guys have a massive influence on the world economy and without central banks we’d be spending every weekend gathering firewood and stalking moose (which is hard in the GTA). There’s a global CB push to normalize interest rates. You cannot resist. So get ready. And if those in control of your money think gold is a useless possession, so should you.

TRUE OR FALSE (searching for a grain of truth in the unsubstantiated claims of Vancouver Island agents)

* “I know for a fact that Victoria changed forever in 2015. Since then we’ve seen massive year-over-year gains in single family home prices every year. And there are no signs of those massive price gains slowing down!

It’s different here! I know real estate and our city’s sales slowdown did nothing to slow down year-over-year price gains. Demand has definitely tanked and I still don’t know why that happened. It really bothers me. I totally didn’t see that coming.

But just think if you would have bought a year ago you would already be looking at a 15% price gain. That’s Victoria real estate for you! Always a guaranteed investment. If you want to be wealthy you need to buy now before you get priced out forever!

Buying right now is a no-brainer. 15% -plus price gains every year became the new normal in Victoria in 2015 and I guarantee this will never change!”

*****************************************

If single family home prices in Victoria really are 15% higher than a year ago it would definitely show up in the Victoria R/E board’s average price data.

Those numbers don’t show that SFH prices in Victoria are 15% higher than a year ago. In fact, the local board’s price data show that prices in June were at almost exactly the same level as a year ago (+0.4%).

The above price data also show an obvious trend – that year-over-year price gains have been shrinking since the start of 2018.

June’s year-over-year price change was basically zero (+0.4%). This clearly indicates that year-over-year price gains have almost disappeared and will soon be replaced by year-over-year price drops.

Falling house prices? Naturally. What else do you think happens after a housing bubble peaks? Mean reversion of house prices is inevitable with housing bubbles.

And the inevitable deep price decline that constitutes mean reversion in a housing bubble never happens in a safe, soft, slow, controlled manner. Hundreds of years of world housing bubble history makes that 100% clear.

Flattening yield curve usually precedes a market correction. Also CBs are usually late to the punch when it comes to rising rates. That’s what happened in the 80s they let inflation get away from them and then were forced to hike faster than the economy could handle. North American economies are strong, yes, but I would argue we are in the late cycle and the truth is no one knows when it will roll over. So yeah, balanced approach works… or crypto! Obviously.

Just the other day was looking at a little country even though I heard about it years ago. Its rated 1,2,3 in the world according to categories. No city in Canada comes close to its structures because it has everything with the cost of living 70% less. A permanent status of residency has no restrictions and its a cake walk, and during the first 5 years no taxes, and afterwards just a flat 12%. Being a sovereign nation no worldwide income needs to be reported. No wonder the Americans, Canadians, and Europeans retired there years ago. Not an island but has beautiful beaches.

but didn’t the central banks pour trillions into the western economies to keep them afloat while Wall Street hedge fund managers (and their derivatives scam) walked away with billions? what about all the losses world wide because of the lies the rating agencies put out….someone made out fine Garth but most lost their shirts

Only those investors who panicked and sold into a storm lost. Their own fault, actually. – Garth

Currently the Bank of Canada is sitting on just over $91 billion, or $69.3 billion US. Two-thirds of that amount is held in American dollars, ($47.5 billion), with the rest in Euros ($14 billion), Sterling ($7 billion) and yen ($1 billion). As mentioned, gold = zero. – GT
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So, Bank of Canada is holding only $21.5b in CAD out of $91b @ 23.62% . Why would it be allocated like this ? Are they trying to tell something ?

All figures are US$. The bank does not hold C$ reserves. (Why would it? They print the money.) – Garth

“Shocking as it may be to the economists populating this blog’s demented comment section, CBs know what they’re doing. It was central bank actions which stopped a financial crisis from becoming a depression ten years ago. Since then these dudes have – despite profligate, misguided politicians and quixotic, volatile voters – brought us to this point.” -GT
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I think you will regret saying this, Garth.
“This point” is “at the brink”, in my opinion. Their policies have kicked the can…, so to speak, meanwhile inflating debt levels to unprecedented levels. If you think that the ‘calm’ we’re experiencing means that they’ve ‘solved’ the 2008 problems – well, no. The ‘calm’ is the eye of the storm – and there IS going to be the other side.
In a way, I’m hoping I’m wrong – but lately I’ve been way more ‘right’ than ‘wrong’; I expect my streak to continue.
I’m not buying precious metals because I like licking them – I’m buying ‘insurance’ against the CBers recklessness over the past decade (and beyond).

Do you think there is any value at all to holding a bit of gold. Maybe 3-5%?

Ive been considering it.

Pro- China and Russia have been increasing their holding as percentage of reserves
Germany and other traditional allies have been removing their holdings from the US
Uncertainty ahead with QT and raising rates and trade wars
Bonds the traditional safe haven could get slammed in the short term with raising rates

Against – No yield
– expensive to store/ hold
– Jumped a lot when QE was rolled out. Now we are doing the opposite
– Priced in USD which looks like it will continue to rise in value at least for the short term
– If hyper inflation ever did occur, we have much bigger problems

TL;DR: a lot less fiscal policy would have been needed to fix the financial meltdown if there had been some gov’t spending in the mix (the ‘Publicans blocked Obama’s attempts to use fiscal policy, so only monetary policy was available). Austerity policy was one of the things that brought Hitler to power, and probably one of the causes for the popularity of Trump and the rise of the “populist” right wing in Italy and other European countries.

Sometimes it’s a matter of “choose your poison”.

[Of course, there’s plenty of unnecessary gov’t spending, but plenty of that also happens on the “conservative” side, just for things that you might think are necessary and I don’t]

Right on the money Garth.
Bernanke was the right man for the job.
Only thing I would add is that our country did a poor job educating our human capital while we were living on the real estate bubble.
That was the tragedy.

Ford is under attack because he challenged the agenda established by the Trudy government. The one involves cap and trade, were $420 million in Ontario funding is under review. The other involves the need for more funds in regards to the migrants coming to Toronto, and Trudy says Ford simply doesn’t understand it all, so maybe no more money.

“The bankers did it by dropping rates, adding massive stimulus, flooding the world with credit, restructuring debts and coordinating monetary policy.”

The coordinated gov’t (US and Can) + CB interventions to take on & restructure debt, provide stimulus (QE), and some lowering of rates was required to keep the ship from capsizing.

There was absolutely NO requirement to drop rates to 0 and keep them there for almost a decade. If the Fed had of stopped at 2%, and did all of the rest (with some normalizing of rates starting after 2012), then things would have turned out roughly the same in terms of recovery, minus the worst of the debt bubble.

This recovery has yet to be paid for (and maybe it never will – which US administration is going to start paying back $21T?).

#26Garth Man Won't Predict Next Recession - Because He Can't on 07.05.18 at 5:33 pm

The scientific urge to determinism and complete predictability is a search for the impossible—and is therefore profoundly unscientific.

#9 Little Country on 07.05.18 at 4:39 pm
Just the other day was looking at a little country even though I heard about it years ago. Its rated 1,2,3 in the world according to categories. No city in Canada comes close to its structures because it has everything with the cost of living 70% less. A permanent status of residency has no restrictions and its a cake walk, and during the first 5 years no taxes, and afterwards just a flat 12%. Being a sovereign nation no worldwide income needs to be reported. No wonder the Americans, Canadians, and Europeans retired there years ago. Not an island but has beautiful beaches.

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My guess would be Costa Rica or Panama.

#28Gartman not Garth man - This Is Now A Bear Market on 07.05.18 at 5:37 pm

Around 4am this morning Gartman released news letter that a bear market has begun.

“……The need to try and organize the economy better was obvious, since politicians had royally screwed things up (with a trade war, ironically)……
__________________________________________

Ten years ago, America blew its financial brains out under a ‘de-regulated’, ‘less-government-is-best-government’ Republican rule.

If all it takes is a trade war to trigger an economic depression, then the thin-skinned, serial-lying, draft-dodging, whack-job currently running the show down south is well on his way to Republican history repeating itself.

#34Treasury Curve Plunges To Flattest Since July 2007 on 07.05.18 at 5:43 pm

One More Hike To Inversion.

Remember 9 of the last 10 curve inversions have rapidly presaged a recession (and the last two curve inversions saw the stock market cut in half).

It is beyond pathetic AND ridiculous that we citizens of Canada who are tax payers can’t buy a home in BC because illegal money from overseas on which no tax is being paid in BC or overseas is allowed to come in and speculate with our land and property and deprive us of home ownership in our own home province.

Why do we Canadians allow ourselves to be taken for a ride? Are we such idiots or incompetents? All officials who are complicit must be jailed.
Did I miss a full moon? – Garth

Just a quick correction. Central banks of China, Russia, and Germany have been buying hundreds of tonnes of gold per year, not to mention many other banks. That is an inconvenient fact for many bloggers, but it is a fact and all the snarky remarks of financial advisors cannot blot it out.

“And if those in control of your money think gold is a useless possession, so should you.”

This is nonsense. An individual has different needs and operates towards a different goal than a central bank. Comparing the two is useless.
Gold may well be a useless possession for a central bank but to an individual investor a modest gold holding does decrease risk on the long run.
I know you are biased against gold, Garth, for whatever reason (maybe you should read more about gold and its use in a balanced portfolio?), but from this to making this type of out-of-this-world comparisons is a long way.

Doug Ford is planning to axe Ontario Works and replace it with workfare by August 01, 2018. Doug Ford is encouraging forced labour by forcing those in poverty to work for pennies on dollar to receive a welfare cheque.

Doug Ford says that those on welfare can find efficiencies in their rent by living in remote areas of Ontario where not even the Eskimos dare walk.

Doug Ford will cut OW by 85%, ODSP by 65%, EI by 50% and allow real estate speculators to keep their profits tax-free. This is unfair! Women hold up half the sky and we need a Trotsky revolution to hold Doug Ford accountable for his neo-Tory agenda. WE NEED TO STOP THIS MONSTER DOUG FORD!

#6 tkid on 07.05.18 at 4:30 pm
How much impact would a trade war between the US and China have?

Zero. Already priced in. – Garth
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#11 Jon on 07.05.18 at 4:43 pm
9 years into the bull and no recession on the horizon? If you say so.

There are no signs. The economic downturn lasted more than eight years. The recovery will be elongated as a result. – Garth
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You are mister know it all. Always have a response to everything. You sound like a Real Estate Agent or better yet, just like, what’s his face, oh yeah, Just-in-Time Trudeau – the groper/hypocrite/etcetera etcetera etcetera.

#27 Howard – You guessed wrong, and the 12% in the 6th year only pertains to income earned in the country, but if one desires to file in Canada a tax credit will be provided. The Smoking Man would love this place because the casinos are everywhere just like Vegas. One man from USA in comments stated, this place is great because all the drinks are free no matter where I go.

I’d argue the BoC stayed way too long at the low interest party. Particularly Poloz’s Chicken Little reaction to the drop in oil prices, which really only whacked Alberta. He created a housing bubble whose proportions are way more dangerous than a temporary low price per barrel.

When we do have a recession they will probably not tell us anyway. And we probably will not notice. The claimed rate of inflation is 2% and we all know that it is more like 6-8%. Everything they tell us is lies or just incorrect. Who really believes what the politicians and government tells us anymore ?

“It was central bank actions which stopped a financial crisis from becoming a depression ten years ago.”
__ __ __

Respectfully disagree:

>Canadians have tied up hundreds of billions in non-productive assets, a massive mis-allocation of capital that will (and must) correct.
>Out-of-control increases in mortgage debt/consumer debt will drive low economic growth in times of rising interest rates.*
>The more money that goes towards debt servicing results in less rippling through our economy.

*Immigration is the main driver of economic growth in Canada. Our productivity is lacklustre and our ability to create incremental value-add wealth is wanting.

Our central banks have taken the path of least resistance. It didn’t start in 2008, it began under Chairman Alan Greenspan in 90’s. They simply took the notion of almost free money to it’s limit.

There are no free lunches in economics even if we dodged a “depression”.

I don’t understand everyone’s obsession with gold. It has little actual value. If you think the world is going to end buy land not gold. Anyone ever think you will be able to exchange gold flakes for groceries? No one will ever barter with gold if the economy crashed.

#47 No Cigar on 07.05.18 at 6:25 pm
#27 Howard – You guessed wrong, and the 12% in the 6th year only pertains to income earned in the country, but if one desires to file in Canada a tax credit will be provided. The Smoking Man would love this place because the casinos are everywhere just like Vegas. One man from USA in comments stated, this place is great because all the drinks are free no matter where I go.

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Well let’s see.

I was thinking Thailand, but you said it’s a “little” country. Thailand, at 65 million people, isn’t little.

You mentioned ease of permanent residency I think that would rule out an EU country.

Not an island.

Low cost of living, so I presume that rules out the likes of Qatar or UAE.

You don’t specify what categories it is ranked 1/2/3.

I guess it could be Belize or Ecuador?

If it IS an EU country it could be Portugal, but I don’t know how simple its residency/immigration policies are for retirees. And low-tax isn’t exactly what I imagine about Portugal.

Brunei? Then again I’ve never heard of anyone even visiting there let alone MOVING there. Many don’t even realize it’s a country.

This pertains to the faulty agreement involving the migrants coming from USA via Quebec. I have often wondered why this agreement was not cancelled because it was not in Canada’s best interests, or declare an Act of Emergency. The other alternative was to declare this in terms of a new entry point. Just move in a pre-fabricated trailer with a sign – Canadian Customs – with a customs officer on duty, and RCMP officers standing on guard. If a country cannot protect its borders you loose the country.

#47 No Cigar on 07.05.18 at 6:25 pm
#27 Howard – You guessed wrong, and the 12% in the 6th year only pertains to income earned in the country, but if one desires to file in Canada a tax credit will be provided. The Smoking Man would love this place because the casinos are everywhere just like Vegas. One man from USA in comments stated, this place is great because all the drinks are free no matter where I go.

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Oh, maybe it’s one of the Balkan states – Slovenia or Croatia. Probably not Serbia. Macedonia has no coastline.

Likely not Bulgaria – too poor. What American would move there?

Casino would point to Monaco but that’s definitely not a low-cost locale!

The central bankers kicked the can for 10 years and borrowed everything from our future with excess debt. They caused the Great Depression and they’ll also be the cause of the sequel to the Great Depression, the Great Depression part 2.

As the collapse of the Iranian rial has led to soaring inflation, leading to protests and civil unrest, authorities are beginning to crack down on “gold hoarders” as Iranians scramble to preserve their wealth by swapping rials for gold, which has the added effect of exacerbating the already troubled currency’s decline.In a move that will send a message to others who’ve buying up large quantities of gold, Iranian police have arrested a man they accused of hoarding two tonnes of gold coins with the intention of manipulating the local market. Tehran Police Chief Gen Hossein Rahimi said the unnamed 58-year-old had collected an estimated 250,000 coins over the past 10 months, working in concert with several accomplices. Police dubbed him “Sultan of Coins.”
The rial has bounced off its all-time lows to trade at roughly 81,000 to the dollar on unofficial currency markets on Wednesday, according to the BBC.
In a scene that mirrored the protests that rocked Tehran in early January, merchants from Tehran’s sprawling Grand Bazaar shuttered their stores in what state media described as “a protest against rising prices and a weakened currency.” During times of unrest, authorities often try to redirect public anger away from the government by creating a scapegoat – like “hoarders” – and blaming them for the country’s economic ills… and – after seeing the chart below, is a full declaration of gold confiscation coming?
But with protests continuing in the capital, we’ll see if that approach works, or if police will need to fall back on their initial plan: Tear gasing everybody.

I like gold. I suppose I should since I was the 4th generation of B.C.ers to work in a hard rock gold mine.
When we were kids in summer the water was low;the old timers would send us out to their spots under rocks & such in the creeks. Haul the black sand to the beach pan for flake & flour. At the time we were so bored its was all we could come up with to make enough to buy tootsie rolls.

Now I’m partial to maples. I bought them for hard times; but good times is when I have to raid my stash. What?
Simple, hard times people are hungry. Good times, lotsa work, people making money. To get the top guys you gotta sweeten the pot. Nothing like the dull clink of gold.

The US Fed, The European countries, and the BoE all hold some gold. In fact the US continues to be the largest holder of gold reserves in the world, by a considerable margin. But the remainder of the top 10 is a who’s who of economic prowess including Germany, Russia, and China, the later 2 continuing to add to their reserves rather consistently, and Germany for some reason making efforts to repatriate the gold it holds abroad.

So the real reason the BoC doesn’t need to hold gold directly is because most of it’s reserves are in the currency of countries that do hold gold reserves. It is therefore kind of redundant for the BoC to hold its own. It has the necessary exposure through mostly the holding of US dollars.

Folks, the US dollar is still the predominant reserve currency in the world. And what does the Fed hold as foreign reserves? 75% of it is gold.

When you consider that the US Fed is holding the gold on its books at a very outdated price, at current prices the US Fed is holding almost all of its reserves in gold.

There probably is no reason for the BoC to hold gold when it can hold US dollars, and probably no reason for an individual to either. But for the US Fed, there is no where else to go but to gold, and that’s what they’ve done. If the world’s major central banks (the BoC is not one of them) all tried to divest gold, they’d just be holding each other’s paper in a big circle jerk.

Gold has, since it was first discovered, been the root form of currency. Silver was as well, but more so because they needed to mint a lot of coins before paper money became accepted.

So Garth is right, there is no reason for an individual to own much gold, 5-10% used to be his recommendation, unless you are speculating on dollar devaluation. The central banks of the world hold it for you. But it has by no means left the monetary system. It is pretty much the only thing backing the world’s reserve currency, the US dollar.

And no, the “full faith and credit” and “ability to tax” thing isn’t what supports the US dollar. Those are nice phrases, but like so many phrases they are just word salads. You can’t tax what isn’t there, so when TSHTF, taxes aren’t available. The ability to tax is what supports the government’s availability to borrow, because that is the income stream the lender is looking at to support the loan. It supports the bond, not the dollar.

The dollar is not 100% backed by gold as it once was. Now the formula is very complicated, it involves interest rates, scarcity of dollars themselves (central banks know now not to print to many of them but they sometimes get overwhelmed by political pressure as happened in Zimbabwe and Venezuela) and I am sure there are a couple of other factors including something like the “reserve ratio” (how much gold a CB needs to keep on hand compared to the amount of currency it issues).

45) We have gold because we cannot trust governments. ― Herbert Hoover

48) Gold is money. Everything else is credit. – J. P. Morgan

52) In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. – Alan Greenspan

59) Gold is the money of kings; silver is the money of gentlemen; barter is the money of peasants; but debt is the money of slaves. – Norm Franz

93) Regardless of the dollar price involved, one ounce of gold would purchase a good-quality man’s suit at the conclusion of the Revolutionary War, the Civil War, the presidency of Franklin Roosevelt, and today. — Peter A. Burshre

96) Gold was a gift to Jesus. If it’s good enough for Jesus, it’s good enough for me! – Mr. T

Mike Harris is a monster. Oops I mean Doug Ford is a monster. He is so in the pockets of business and very much against the people. This monster has already stopped the scalper law so that the people can be fleeced by crooks marking up tickets. He also put a halt on vaping law. This guy will do whenever you want if you have money. He is shaping up to be a bigger monster then Mike Harris. Physically he is already very big . Ford will take from the poor so he can give it to his business buddies. How could anyone believe this guy is for the people??

Sure, and ‘normal’ people have a [email protected] financial advisor who loads them up with high-fee, in-house Mutual Funds and other crap that ends up going nowhere!

I seek not to be normal; rather, I seek to be ‘exceptional’, at least in things that matter. My last few years’ (exceptional) portfolio performance is testament enough for me that I’m on the right track.

There are times to step up to the plate and hit the ball out of the park (ie. when the pitch is slow, the ball is ‘fat’ and right in the middle of the plate). Buying precious metals related stocks now is one of those times.

Of course, there are times to not even play the game and stay under the covers in a warm bed – with someone who’s desireable and willing to share it with you…with an all cash (or equivalent) position. That may be in 12-24 months from now. Time will tell…

I ran this one a while ago but it seems a couple of people might have a bit of renewed interest in it tonight…

M44BC

“These Countries Have the Largest Stashes of Foreign Currency in the World.

Foreign exchange (or forex) reserves are a key indicator of economic health. They provide policymakers with a tool to control inflation, ensure the continual flow of imported goods into the country, and generally provide a sense of security in uncertain economic climates. With the U.S. national debt recently topping an eye-popping $21T, we started thinking about how the U.S. stacks up against the rest of the world in forex reserves.

We got our data from the International Monetary Fund (IMF) for Q1 2018 (the latest numbers for a handful of countries, like Saudi Arabia, are from 2017). We first color-coded each country by continent and then adjusted the size of the country by its reserves, excluding those places with less than $5 billion in reserves. This approach provides a unique snapshot of the world economy in one easy-to-understand and colorful map.

Top 10 Countries with the Biggest Forex Reserves
1. China: $3,162B

2. Japan: $1,205B

3. Switzerland: $785.7B

4. Saudi Arabia: $486.6B

5. Hong Kong: $437.5B

6. India: $397.2B

7. South Korea: $385.3B

8. Brazil: $358.3B

9. Russia: $356.5B

10. Singapore: $279.8B

The first and most obvious trend on our map is the uneven distribution of forex reserves around the world. China leads by a longshot with $3,162B, almost three times as much as second place Japan at $1,205B. It is hard to imagine just how much money China has stashed away—it’s enough to power the entire $2,651B economy of the United Kingdom for an entire year and then some, royal weddings included. Switzerland stands out in third place with $785.7B as the only European country in the top 10. Part of the explanation is that the Swiss opted out of the European Union, making the Swiss franc a safe haven for European investors. Our ranking becomes tighter further down the list with less separation between the countries, but suffice it to say forex reserves are top-heavy.

You can see the same top-heavy trend when looking at which continents have the highest reserves. Asia clearly leads the way on the right side of the map, second to the green countries from Europe (thanks only to Switzerland). Every other continent is comparably tiny. Take a look at North and South America compared to Asia. It’s not even close. And where is the entire continent of Africa in our visualization? Since we excluded countries with less than $5B in reserves, only four orange countries made it onto the map.

What does this say about the world’s economies? Countries that have a lot of exports tend to stockpile the most forex reserves. Think about all the goods that flow out of China, consumer electronics from Japan, and oil from Saudi Arabia. These places dominate in particular industries or sectors, making them a magnate for forex reserves. Having a large stash of foreign currency means that countries like China and Japan can better handle unexpected economic surprises. The United States only has $44B in forex reserves. That’s not necessarily a cause for alarm because many export-dependent countries rely on America to purchase their goods. That’s how they ended up with such large caches in the first place. Here’s to hoping that current trends continue long into the future.”

Hot Property on CP24 today has Al Sinchole & Co. priming new build townhouses at over 1/2 million dollars each, in wait for it…Fergus, Ontario.
Home of cow tippping, cow dipping, and cow shipping.
Baha who needs a Comedy channel

CB history lesson, CBs lifted us from Great Recession oblivion with near Free Money and the World economy is back, CBs now slowly raise rates to prevent economic shock and thus it will take awhile longer, ipso facto, all is well and no foreseeable recession (and as a side note, me and the CBs hate gold, so should you).

Well, that was thin.

Collapse of US subprime market: March 2007.

Less 2 years to lower the BoC rates from 5% to near Free Money leaves about 9 years of low interest rates, OR an 11 year low rate environment.

That’s a LONG time 11 years of Free Money.

Former Ayn Rand acolyte St. Alan Greenspan (2007 Biography):

“History has not dealt kindly with the aftermath of protracted periods of low risk premiums.”

Neither will it for the BoC and Canada.

We are awash in debt.

B20 came too late to prevent the Banks taking free money and lending it to far too many unfit mortgage borrowers whilst making tidy profits along the way (meanwhile, doing nothing to reign in the Banks on other forms of debt to unfit borrowers).

The RE bubble has burst with price declines and more to come (queue unfit HELOC borrowers).

Quite a terse little press release this month. Not surprised, the lipstick is getting pretty thin…

Detached sales ‘Year to Date’ are now down in all sectors. Compared to last month, some are accelerating: Maple Ridge is down 9 percentage points, from -14% in May to -23% in June (back in March, YTD sales in MR were actually up 5% – so that’s a very steep drop)! Coquitlam (sales down 5 points, to -30%), Burnaby (down 3 points, to -32%), and East Van (down 2 points, to -31%). Some areas are holding: Richmond (-44%), PoCo (-30%), New West (-6%). But really, everybody’s sales are down. Overall, house sales ‘year to date’ are down 33% over 2017. That’s one third less than they were last year.

Year to date in 2018, Median Price appreciation is grinding to a halt in Burnaby (0%), and North Van (0%), joining the West Side of Vancouver and West Van, which are already in retreat (-4% and -12% respectively). East Van eked out a 2% gain (down from a 4% gain last month). Dead cats are bouncing in Richmond and Port Moody, on thin volumes as the greatest fools rush in to catch them.

Comparing June 2017 and June 2018, monthly sales are down in all areas; New West is keeping up (only down 9%), while 55% fewer houses were sold in Maple Ridge, 51% fewer in Coquitlam, and 48% fewer houses were sold in Port Moody. Richmond (down 45%) and West Van (down 48%) continue to decline.

Comparing median prices from June 2017 and June 2018, we’re seeing RED in Van West (-14%) Burnaby (-12%), New West (-9%), Van East (-6%) and declines in Coquitlam and Delta (-4%), West Van, North Van and Port Moody. Since BC property assessments are based on market value of properties at July 1st, these figures give homeowners a little preview of what to expect next January.

We’re also tracking declines in median prices in the 7% to 10% range from May to June, but the small sales volumes in some areas make predictions untenable. This is the area to watch, to compare how much home values have actually declined over the year, compared to the declines in assessed values.

Finally, Sales-to-Listings: down 35% overall (was down 33% last month), year to date. Interestingly, the number of new listings appears to be declining as well (down 2% overall). Looks like lots of people choosing to hold onto their homes, until the market corrects.

What’s the old saying? Better to take your house off the market, and be thought a fool than make an offer, and remove all doubt? Something like that.

Quite a few comments on gold here. There’s lots of stuff going on behind the scenes regarding gold. On Jim Rickards Twitter (best-selling author, today’s tweets) page you can read that he thinks Red China got gold pegged to the SDR (Special Drawing Right/IMF money backing up other currencies). Red China and Russia are buying up gold to try and take out the US dollar as the world reserve currency and replace it with a basket of currencies including theirs. I don’t know if Rickards is right or not but it’s an interesting thesis. I keep my eye on gold, anyway.

#60 Howard – Give it up because your lost. Oh, and there is no crime allowed except for a few thieves, but are dealt with if caught. They even have a list which bands the citizens from certain countries to live there, because they refuse the known trouble makers in the world. No property speculation is allowed, and their moto is to live in freedom.

Anybody out there familiar with the Bank of International Settlements or the BIS? Its a private club of international central bankers based in Switzerland. I’m thinking this is where the decision was made to normalize rates the indebted be damned.
Is our central bank governor a member?

“I always thought you were more enlightened than this. Interesting. Gold is not money. – Garth”

Of course I agree that gold is not money. It’s something central banks can pawn if things get bad, that’s all.

If for some reason the US dollar utterly collapses, which it won’t, the Chinese will begrudgingly take gold rather than nothing. They can make statues out of it.

It’s sort of how if your friend borrowed some money and can’t pay it back you’ll have to accept his lawn mower and old stereo, maybe a guitar, in payment. It’s not what you expected, it’s pennies on the dollar, but it’s more than zero.

And you cannot deny that the US Fed has most of their “reserves” in gold, and they also manage the world’s reserve currency. That doesn’t make gold “money” in today’s world, but it does mean they have something of value to trade if they have to. Which they probably won’t. But they have it if they need it.

I’ve checked out your blog over the years. A few years back you were at least partially warm to gold, now seems you won’t touch it. In 2002 I sold some bonds (10 %) of my portfolio and bought 100 Canadian Gold Maples at an average cost of abt 345.00 US. I put them away in my safe deposit box and today they are worth approx. $132,000.00 US. Seems to me they were a pretty good investment. And, if sold a certain way (legal) no capital gains…

So I was correct then, 16 years ago. As I am now. And of course you have to pay tax on the gain. – Garth

#6 tkid on 07.05.18 at 4:30 pm
How much impact would a trade war between the US and China have?

President Trump has a very good relationship with China’s Xi, and I think the vision is that China, NoKo and SoKo will all win by investing in a sort of “Marshall Plan” to rebuild NoKo, which is now so poor but once it changes its focus, will have great potential to be a wealthy and prosperous trading nation.

The spread on the 10yr vs. 2yr treasury in the US is only .3%. Jeez Garth, with one more rate hike the curve is flat. I just don’t see how you get the idea there’s all this growth ahead when there’s almost no more room to move rates without inverting the yield curve (unless the central banks sell massive amounts of long dated US treasuries and mortgage back securities to raise long term rates)????????

#11 Jon on 07.05.18 at 4:43 pm
9 years into the bull and no recession on the horizon? If you say so.

There are no signs. The economic downturn lasted more than eight years. The recovery will be elongated as a result. – Garth

———-

No one (except a very few) saw it coming in 2008 either. Unemployment was low and economic prosperity was alive and well. Then came October and the downturn happened regardless though. Was it fluke? Sure. Could something similar happen again? Of course. The majority of the population is complacent and that is a recipe for disaster. It’s been a while since the general populace has had a rude awakening. They are definitely not on their guard.

As for the last 8 years being interpreted as an economic downturn, my investment portfolio begs to differ. Best time in my lifetime to make money. Wage growth for the same period was not stagnant either.

At the beginning of this year, I decided to go from a 60/40 portfolio to 50/50 (fully invested and still balanced). It shaved between 0.50%-0.75% of my return so far YTD versus my staying at 60/40 but I’m still in the black and making money. If a downturn doesn’t occur near term, I consider that 0.50%-0.75% my cost of partially insuring and insulating my portfolio. If a downturn or a correction occurs, it will allow me to rebalance nicely and hopefully recover faster as a result.

Sometimes, leaving a little bit of profit on the table can provide a net benefit down the road. In 2008, my return was +3.31% for that calendar year. That gut feeling I had in 2007 is starting to pester me again. I’ve learnt not to disregard my gut. My gut may not be a Bloomberg terminal that spits out all that fancy data but it has served me well nonetheless. Regardless of the outcome, I accept the consequences of my decisions.

“…But the real winner? Switzerland, baby. The little spec of a place is the 98th biggest country and yet has a central bank stuffed with $757 billion US worth of assets – ten times our level – and number three in the globe.”

———————————————————-

$757 billion US of assets.

No surprise…considering “some” was obtained via unscrupulous and nefarious dealings with an insane dictator during WWII.

Garth says: “And if those in control of your money think gold is a useless possession, so should you.”

Interesting that the three countries mentioned have some of the largest gold holdings:
U.S. — 8,133.5 tonnes of gold
China — 1,842.6 tonnes of gold
Switzerland – 1,040 tonnes of gold
Canada – 0 tonnes of gold
What do these countries know that we don’t?

the greatest market manipulation in all of history has been globally coordinated by the world’s central banks, who have gone wild with endless money printing to keep the bubble that started in the mid-1990s from bursting.

What’s more, that bubble was already out of control due to decades of manipulation prior.

How do you think we got the Great Recession of 2008 and 2009? It resulted from endless debt growth, and central banks fostering financial bubbles through unprecedented liberal lending policies.

To make it worse, our own Fed decided to ignore the consequences and stop the bubble from fully bursting. Why delay the recovery when we can get it right now?

I’ve checked out your blog over the years. A few years back you were at least partially warm to gold, now seems you won’t touch it. In 2002 I sold some bonds (10 %) of my portfolio and bought 100 Canadian Gold Maples at an average cost of abt 345.00 US. I put them away in my safe deposit box and today they are worth approx. $132,000.00 US. Seems to me they were a pretty good investment. And, if sold a certain way (legal) no capital gains…

So I was correct then, 16 years ago. As I am now. And of course you have to pay tax on the gain. – Garth

“Why do CBs – including the “real winners”, like in China and in Switzerland – keep buying gold? What’s in it for them?”

In China I believe it’s cultural, and it is sold to the people. Gifts of gold are common practice.

In Switzerland, it’s probably held as a last resort if financial disaster strikes, to cover their banks. I believe that once upon a time, a long time ago, even Garth said that everyone should have a bit of gold in case of emergency.

“So our central bank is a publicly-owned Crown corporation and operates (thank God) independently from Parliament. It issues the only legal money (other than Canadian Tire, of course), sets interest rates and has a mandate of stabilizing the currency, moderating inflation and supporting the economy.”

The Bank of Canada used to be a government lending institution, creating near interest free loans that built much of Canada’s infrastructure during the 50’s and 60’s. In 1974 at the Bank of International Settlements in Basel Switzerland, Trudeau Sr. was convinced by fellow Bilderberg attendees to dismantle this crucial function of the Bank of Canada, and since then we’ve lost sovereign control of our monetary policies and money supply and government debt at all levels has risen dramatically.This court case challenges the disuse of the Bank of Canada to create money for the public good.

So how did China rank 30 years ago, What was their path forward and are there lessons to learn?

***************************************
Now, THAT is an excellent question. The idea of asking this question reminds me of what was a standing order of business at a social club that Ben Franklin belonged to about 250 years ago:

“Do you know anyone who is rich, and do you know how they got that way?”

China went from poverty and essentially zero private automobiles in 1980 to its current wealthy position in 2018.

I am sure I don’t know much about how they did it. But it had something to do with unleashing the profit motive for many of their citizens.

They set up a system where many workers got little and the government took a high share of the value of their production. But clearly millions of private citizens also shared greatly in the wealth.

Exactly how they did it should be the subject of a LOT more study and discussion.

“The bottom line: it worked”. above article. It worked but only for the ones that went for the debt manipulation. A great leader tries to include all the people within borders. And have to agree with #103 Doug T on the “greatest market manipulation” by the central bankers and I will add by the government. It worked but for ?

As for the NAFTA trade agreement: I like most products made and bought within borders and if excess then trade. Now here is the drawn line: try to keep as close to the borders to respect earth. Common knowledge to buy local and why is that? We know why.

I have read Peale’s books around 2007, knew most of what he wrote but he does not mention about environment and us, how to live within limits.

Tangible gold, feel of it in hands, is only good when a depression hits. A good back up. And that is why people buy gold, security.

No, it’s ignorance. If you want security, keep cash, food and fuel. A gold coin will buy you nothing, especially in a depression (which will not come in this lifetime). The professional bullion-floggers love comments like yours. – Garth

#113 Shawn Allen on 07.05.18 at 9:39 pm
How Did China Get So Rich so Fast?

7 Wait There on 07.05.18 at 4:33 pm asked:

So how did China rank 30 years ago, What was their path forward and are there lessons to learn?

***************************************
Now, THAT is an excellent question. The idea of asking this question reminds me of what was a standing order of business at a social club that Ben Franklin belonged to about 250 years ago:

“Do you know anyone who is rich, and do you know how they got that way?”

China went from poverty and essentially zero private automobiles in 1980 to its current wealthy position in 2018.

I am sure I don’t know much about how they did it. But it had something to do with unleashing the profit motive for many of their citizens.

They set up a system where many workers got little and the government took a high share of the value of their production. But clearly millions of private citizens also shared greatly in the wealth.

Exactly how they did it should be the subject of a LOT more study and discussion.
……………………………..
Dirt cheap labour and almost zero environmental controls is part of the answer that made them a manufacturing powerhouse.

After a lot of reading and thinking, my conclusion is that the value of the Canadian dollar in terms of what it will buy in Canada is “backed” pretty much solely by the Central Bank’s ability to control inflation. I don’t think the U.S. currency that the Bank of Canada holds has much if anything to do with backing the value of the Canadian dollar in Canada in terms of what it will buy.

The Bank of Canada’s foreign reserves including mostly U.S. dollars are used to try to control fluctuations of the value of the Canadian dollar in terms of foreign currencies principally the American dollar.

In any case it is complicated but a worthy goal is to accumulate a lot (an obscene amount would be nice) of Canadian dollars even if their backing is a bit mysterious.

Some Canadians would rather keep much of their wealth in U.S. dollars. But how many Canadians track their net worth first and foremost in American dollars rather than Canadian? Not many would unless they have very unusual ties to the U.S. including plans to spend much of their wealth in the U.S. eventually.

I find your comment today to be strange. It seems a warning not to panic as the Central Banks have our back. Well, I remember 2008 quite well where I could not log onto my DIY accounts for days and stops were missed by downward gaps. It was similar to being a passenger on a jet without fuel. When everyone runs for that tiny exit at the same time – it is not pretty.

True, the central banks have large reserves in fiat currencies but I am willing to bet the national debts are 10 times larger including unfunded liabilities of social programs – pensions for example. This assertion is totally a Trump-piss number – something I pull out of my butt and I don’t think I am wrong. Our systems cannot handle a panic so the powers that be want us to boil like frogs in the water. Stay calm and carry on while our elite run for their bunkers.

The numbers of real estate buyers strike me as being pretty thin these days. It won’t be long for real estate prices to fall quickly when more motivated sellers show up at the same time. July 11, 2018 is showing up as ominous on my radar. I think cheap money has to be taken off the table so I am okay with interest rate hikes and Central Banks reducing their “assets”.

I read from the MS media that Canadians want to fight a trade war. I have said my trade piece about being dumb (is that PC?). I want to have lots of dry powder come this Christmas.

Really interesting read is ‘Empire of debt’ or the updated ‘New Empire of Debt’.
Excellent book on historical rise and fall of empires and currencies.

Currencies only really work as long as everyone believes that the paper it is printed on has some sort of value.
It works well until it doesn’t as almost happened in 2008.
Soon we are all to believe that money is part of your iPhone.

There is only one thing of real value in the world.

That is land.

One can live on it.
Build a house on it.
Grow food on it.
Be buried in it.

Everything else is a depreciating asset, including your paper money which has its value depreciated between 3-5% every year.

The truth is that throughout history empires have risen and fallen along with their currencies. And yet physical gold has remained and retained its value. interesting.

It is a pain to hold physical metals, and if there is a major economic disruption gold and silver will be confiscated by your government as , if their paper money becomes worthless , gold will not.

I suspect that Venezuelans wish that they did not put so much faith in their currency. I suspect that they wish they had 10% of their assets in gold.

I think that there is something to China and Russia accumulating large amounts of gold. And the fact that Canada has none, means that either they know something the rest of the world does not, or they are massively incompetent.

I know it’s not ‘woke’ to believe that an iPhone is a not a true measure of value, or to believe that huge home or personal debt, or massive government debts are bad things.

I’m happy to be old school and believe in things that are real (land) and assets that have a long history of value. That ain’t bitcoin or any other cryptocurrency.

And the fact that precious metals have a long history of success, in fact as long a history as mankind has had , across multiple and vast empires, maybe serves to question whether holding some real precious metals merits decent consideration.

“Simple. That they can never unload it without crashing bullion prices and costing trillions in ghost equity. Trapped. – Garth”
—————————-
Sorry Garth, but this statement sounds, absolutely ridiculous.

While I agree metals don’t play the same role on the global stage they once did, they are far from burdensome for a sovereign to hold.

Now if your talking US dollars, held by China, Japan or Russia, then your rational works. Canada has simply been irresponsible in liquidating all gold reserves.

If you want gold exposure there are two ways. Buy the bullion or buy the equities. Bullion pays you nothing unless it goes up. Gold bullion has made you zero over the last 5 years. The minors are mostly poorly run companies and lose money year after year. The GDX gold miner ETF is down 10% over the last 5 years and it doesn’t pay a dividend.

So how do you have gold exposure and actually make money? The gold streamers. They don’t mine the gold, they just finance the miners and get the bullion as payment. They make money.

I hold 3. Royal Gold, Wheaten Precious Metals and Franco Nevada. The three combined have doubled over the past 5 years and all pay at least a 1% dividend. Considering the TSX is only up 20% over the past 5 years, the minors are negative and gold bullion is flat the streamers are killing it. They know how to make money in any gold market when the miners can’t. I wouldn’t invest in gold any other way.

As an afterthought you hinted at buying BC real estate in a previous comment. I assume you would be looking at the gulf islands. May I suggest you look at Savary Island. I am sure you can afford a boat and float plane. Depends what you want.

Garth, you are right gold isn’t “money” because it actually holds its value. For whatever reason gold has held its value over long periods of time. It’s considered a reserve asset which CB’s around the world hold. Surprised by your serious bashing of gold. It’s part of my portfolio especially given that our CB doesn’t have any. It’s my insurance against CB stupidity. I wouldn’t flatter them with praise as you do. They bailed out a bunch of bank and have caused a very weak recovery by trying to avoid the business cycle. This a debt based “recovery” and I don’t think the next recession will be of the garden variety.

There’s no recession in sight and CBs know what they’re doing!? You’ve drunk the coolaid apparently.

The world now has more debt than ever so CBs solved nothing and only managed to postpone the debt reckoning which must inevitablly come. We get recessions every 10 years and this is second longest stretch ever without a recession so we’re due for one within the next year at most.

Corporate per share profits have been goosed by share buybacks while wages to profits are at all time low.

Garth, do you really believe that with the CB’s stimulating all of this ‘growth’ with credit/money expansion, and the CB’s now in mop-up (reverse) mode to shrink this very same credit/money expansion, that you won’t get a reversal of the boom they created? I have to say that I strongly disagree with that view, and I think your statement will be proven incorrect in the next two years (unless CB’s crap their pants and abandon the tightening and mopping-up).

Second, with Canada selling all of its gold to hold its foreign reserves in other assets, do you really believe that this is not a concern?

Gold is still part of the reserves of most responsible and powerful nations. The mere fact that Canada has none in it’s reserves is not a confirmation of gold being a “useless barbaric relic”, it is only a confirmation of an irresponsible act on behalf of a nation.

P.S
Switzerland is #7 in the World on the list of central banks with the largest Gold reserves, just behind China. Gold makes-up 5% of Switzerland’s reserves.

Canada shares last place in the World with the only 2 other nations that do not have gold, Azerbaijan and Costa Rica. Literally every other nation owns some gold. This should not be a comforting fact.

If you are correct, come to NE Italia to collect (I do not have your accordion sized wallet but something else you may appreciate instead – per your Eat, Pray, Love Blog of a couple of days ago, a.k.a., “What’s precious”):

A multi-course country dinner with my “famiglia”, local wines as from the vineyard you will be seated next to and incredible food served outside “al fresco” awaits you (incl. fruit trees, huge garden, Alps as a backdrop – an Olive Garden TV Commercial of yore, except in real time and de rigueur here…with a Grandmother or two, not the nasty one’s).

Besides the excellent local wine, I can buy you Veneto, Tuscan & Piedmont wines if you prefer (Amarone, Brunello, Barolo) – you being Cdn. and heavily marketed to will seek familiarity in wine names.

Almost forgot, a bottle or two of the finest Prosecco, made locally and where it comes from (served with Tiramisù for desert, also where it originates from).

Obligatory alternate cheek kissing, pre-dinner introductions.

And no, you can’t get the above on College St. W. nor up in Corso Italia – recall where their GMO, Round Up tainted, enough steroid juice to joke a horse produce largely comes from.

Also, you’d be missing an Alp or two.
__________________________________

In all sincerity Garth, CBs have made many interest rate hike mistakes in the past 40 years that you are well aware of and the same goes for S. of the border.

I would not hang my prosperity hat based on their economic performance and advice.

They have in general been late to dinner when it comes to raising rates, allowing bubbles to thrive and then crash – having hurt far too many financially than was necessary.

The hard core gold bugs are a unique and interesting bunch. I have a friend from childhood that became fanatical on gold and silver. He even filled his water containers with silver bars for awhile ( until his health suffered ). These types seem to engage each other on all the same websites and promote the same agenda. He still forwards me his favorites. Another interesting part is that he was a commercial real estate broker. Living in YVR he never bought real estate even through the 90’s and early 2000’s. He’s held gold/silver and is constantly waiting for the “explosion” and end of the fiat currency. He thinks he’s going to be able to exchange his gold for food when everything goes to pot. Really? I tell him if things get that bad, do you think you’re going to make down to the store alive to buy anything? I don’t think so. So many lost opportunities for my old friend living and thinking this way. I can only imagine the money he’d have if he’d just invested in a balanced portfolio. It’s also just not fun to be around these people- waiting for the apocalypse…

I hate gold, there’s no dividend, it costs to store, you get taxed into the ground on profits.

But I wonder sometimes why the Russians and Chinese are hoarding it? And why is the IMF selling hundreds of tonnes of gold to third world countries like India, Sri Lanka, Mauritius? Are we just taking advantage of foreigners?

The pattern, as I see it, is the rich western nations are selling their gold off to poor countries. Better hope the gold standard never comes back.

#124 Shawn Allen on 07.05.18 at 10:11 pm
Backing of the Canadian dollar

After a lot of reading and thinking, my conclusion is that the value of the Canadian dollar in terms of what it will buy in Canada is “backed” pretty much solely by the Central Bank’s ability to control inflation. I don’t think the U.S. currency that the Bank of Canada holds has much if anything to do with backing the value of the Canadian dollar in Canada in terms of what it will buy.

The Bank of Canada’s foreign reserves including mostly U.S. dollars are used to try to control fluctuations of the value of the Canadian dollar in terms of foreign currencies principally the American dollar.

In any case it is complicated but a worthy goal is to accumulate a lot (an obscene amount would be nice) of Canadian dollars even if their backing is a bit mysterious.

==========================

I would not advise on trusting anything BoC say.

Do you honestly believe ‘inflation’ (or whatever bastardized measure of it they accept as CPI) is sub 2 % while cost of living actually increases by 8 % + annually?

“Ford is under attack because he challenged the agenda established by the Trudy government. The one involves cap and trade, were $420 million in Ontario funding is under review. The other involves the need for more funds in regards to the migrants coming to Toronto, and Trudy says Ford simply doesn’t understand it all, so maybe no more money”

the same “Trudy” that punched out Brazeau in the charity boxing match?

#124 Shawn Allen on 07.05.18 at 10:11 pm
Backing of the Canadian dollar

After a lot of reading and thinking, my conclusion is that the value of the Canadian dollar in terms of what it will buy in Canada is “backed” pretty much solely by the Central Bank’s ability to control inflation. I don’t think the U.S. currency that the Bank of Canada holds has much if anything to do with backing the value of the Canadian dollar in Canada in terms of what it will buy.

The Bank of Canada’s foreign reserves including mostly U.S. dollars are used to try to control fluctuations of the value of the Canadian dollar in terms of foreign currencies principally the American dollar.

In any case it is complicated but a worthy goal is to accumulate a lot (an obscene amount would be nice) of Canadian dollars even if their backing is a bit mysterious.

==========================

I would not advise on trusting anything BoC say.

Do you honestly believe ‘inflation’ (or whatever bastardized measure of it they accept as CPI) is sub 2 % while cost of living actually increases by 8 % + annually?

Stay away from this shit/aka loonie.
—————————————————————-
If cost of living increased by 8% over the last 10 years, the average person’s standard of living would have been cut in half. That hasn’t happened.

@#153 Im Stupid
“If all welfare recipients had to spend 2 or 3 hours a day doing something in order to get paid, I bet the number of people on it would get cut in half.
The same goes with healthcare. If you want to cut costs start charging $5 or $10 every time a person goes to see a doctor. This will eliminate all those that go for no reason.”
++++++

#93 Sonia in Salmon Arm on 07.05.18 at 8:41 pm
I’ve checked out your blog over the years. A few years back you were at least partially warm to gold, now seems you won’t touch it. In 2002 I sold some bonds (10 %) of my portfolio and bought 100 Canadian Gold Maples at an average cost of abt 345.00 US. I put them away in my safe deposit box and today they are worth approx. $132,000.00 US. Seems to me they were a pretty good investment. And, if sold a certain way (legal) no capital gains…

—————————————————————-
So, about an 4% CAGR in CAD terms. While XIU returned 7.3% annually over the same time period. Not sure that’s really a pretty good investment.

“Do you honestly believe ‘inflation’ (or whatever bastardized measure of it they accept as CPI) is sub 2 % while cost of living actually increases by 8 % + annually?”

Inflation in Canada is 2%…….unless you want to buy a house, then it has been 20% annually until last year, now about 5-10% negative depending on where you are purchasing…..or gasoline, goes up about 15% per year (but we have Doug Ford now who promises to reduce it by ten cents per liter, at least until Justin puts it back up again with his own gas tax)……or groceries….unless you want to buy vegetables or fruit (10% average increase per year) or meat (8% increase per year) or dairy products (whatever the Dairy Board decides, usually about 8-10% per year but can be a lot more)……or if you want to purchase a car (about to go up by as much as 50% depending on how bad Trump’s auto tariffs hit us)………or if you are in the market for a condo (about 20-30% per year increase, about to be a lot more due to the new steel tariffs which make the steel that they are built out of very expensive – and it is not produced in Canada)……

I have heard that grass seed has gone down in price.

Oh and we might get “buck a beer” in Ontario.

Yeah, 2% annual inflation in Canada. That will be the day (that pigs fly and elephants wear ear muffs).

A lot of gold bugs here.
Gold is the corollary to the USD.
If you think the USD is heavily overvalued go out and buy some unhedged gold miners.
However betting against the USA is usually a bad idea. They attract the world’s best and are innovative.
Dubya was their last dupkoff and a bet against him paid off. Not likely they will elect another low IQ leader for some time.
If they ever elect a SJW bet the farm, but that will be a cold day in hell because Americans are not Venezuelans.

#43 CUPE 3000 on 07.05.18 at 6:14 pm
Doug Ford is planning to axe Ontario Works and replace it with workfare by August 01, 2018. Doug Ford is encouraging forced labour by forcing those in poverty to work for pennies on dollar to receive a welfare cheque.

Doug Ford says that those on welfare can find efficiencies in their rent by living in remote areas of Ontario where not even the Eskimos dare walk.

Doug Ford will cut OW by 85%, ODSP by 65%, EI by 50% and allow real estate speculators to keep their profits tax-free. This is unfair! Women hold up half the sky and we need a Trotsky revolution to hold Doug Ford accountable for his neo-Tory agenda. WE NEED TO STOP THIS MONSTER DOUG FORD!
______

Bwahahahahahahaha! What a load of bullshit! This is a bunch of Globalist drivel. The world is reverting to Nation states with proven reserves (including gold) and you brag that Canada has zero gold reserves! OMG! Laughable. Good luck with that strategy.

Johnny # 141,
“There is a Russian threat.”
“The propaganda here is a joke compared to the ******** who have become proficient at the manipulation of their own people and are now mastering the influence of other regions of the world.”

“Then come back and talk to me.”
——————————
The “Russian threat” you speak of may well apply, to the citizenry of Russia. You clearly, would know better about that, than I.
Thing is, I live in Canada and my concerns are for the maintenance of global peace. (It’s about me & mine, have you not been paying attention?)
Speaking of propaganda, when you review the names and misdoings of the “threats” you’ve been describing in the past few days, one realizes, you fail to even acknowledge, never mind include the misdeeds of the US of A in the past century.
I could get into some of the dozens of documented wrongdoings (repeated unprovoked invasion of sovereign nations + regime change = weapons of mass destruction) of our southern neighbor in the past century, but to what end?
It is, what it is, but this of course does not fit with your indoctrinated view:
“God Bless America”
I honestly believe the USA is currently a greater “threat” to global security, than any other superpower. They are slowly loosing their economic dominance via currency hegemony (global pool to distribute US $ inflation) enjoyed since the WW2.
This, may be worth going to war to try and maintain.
Disclaimer: I am very aware of the multitude of benefits we receive, as the USA’s, little brother and am very thankful to be located next to this global power house, even with all its flaws.
Full circle….
So Trumps cruising the planet making nice (business contacts) with bad guys only decreases the odds of a global conflict and that’s something I’m all for.
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It just goes to show you narrow minded some Americans are. They are willing to the overweight old crazy guy a pass on of the shit that come out of his little mouth. Some of his ideas are sound but come on people, he loves North Korea, can’t say anything bad about Russia, hid family is into the Russians via German banks for billions, and his daughter received patents in China. Give your head a shake this guy is as dirty as they come, corruption reins in his office not subversively but blatantly open. I’m sorry but as a son of immigrants to this country he is everything my parents tried to escape. Donald Trump is a white supremacist supporter plain and simple. You are correct the Democrats need to step up to the plate and put one across the fence in order to move this piece of shit into the garbage bin. My father says anyone who lies like him to millions of people is “il diavolo”.
Above was the start of a conversation about the corruption and intent of Trump, I didn’t discuss Canada and as far as the USA goes with failing to even acknowledge, never mind include the misdeeds of the US of A in the past century. OK let’s get it on! Here is the poop with the USA in case you not up on their history. One in nine elections around the world have been calculated to be I will use the words” rigged or influenced” the vast scale of election interventions by both the US and Russia. There have been 117 “partisan electoral interventions” between 1946 and 2000. That’s around one of every nine competitive elections held since Second World War. The majority of these, almost 70 per cent, were cases of US interference. And these are not all from the Cold War era; 21 such interventions took place between 1990 and 2000, of which 18 were by the US. 60 different independent countries have been the targets of such interventions. The targets came from a large variety of sizes and populations, ranging from small states such as Iceland and Grenada to major powers such as West Germany, India, and Brazil. It’s important to understand that these cases vary greatly – some simply involved steps to publicly support one candidate and undermine another. Almost two thirds of interventions were done in secret, with voters having no idea that foreign powers were actively trying to influence the results. So there is just a snippet of USA and their own meddling. The Russians I can tell you are far more dangerous than Donald Trump and they appear to have great influence over him. That my friend is scary. I live in Canada as well and have lived in the USA during my University years. I agree with you wholeheartedly that the USA are slowly losing their economic dominance via currency hegemony, in fact I believe the days of the greenback are numbered. He is where we need some stability in the USA as they still steer the ship and we on only on it for the ride. The current administration is stupefying, immoral and deathly unethical. The Democrats are not in power and I’m am not confident that they could do any better. However saying that the Trumpian version of the GOP which I still cannot call republicans as they are so devoid of a clear course that no one gives a hoot as long as the dollars flow into their own coffers. The current administration is dangerous with Trump being under Russian influence what good will cruising around the world do in the end when you eventually will be controlled by Russians. Remember we live next to them. So much for safety and peace if you are controlled by the “thought police”. BTW “God bless America was in response to the Irvin Berlin story in case you didn’t read it?.
теперь понимаешь?

If cost of living increased by 8% over the last 10 years, the average person’s standard of living would have been cut in half. That hasn’t happened.

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Math and logic is hard, isn’t it?

Do some exploration and research, go to stats Canada, BoC sites and check household credit increase in the last 10-15 years.

If there is half a neuron in that brain it will detect that most people in the last decade and a half lived on credit and/or extraction of value from property as well as on depleting savings/sales of investments.

Also check saving rates (historically low), why do you think TsX is nonperforming? The sheeple has no money, only debt…

@#151 JWD on 07.06.18 at 3:23 am
The hard core gold bugs are a unique and interesting bunch. I have a friend from childhood that became fanatical on gold and silver. He even filled his water containers with silver bars for awhile ( until his health suffered ). These types seem to engage each other on all the same websites and promote the same agenda. He still forwards me his favorites. Another interesting part is that he was a commercial real estate broker. Living in YVR he never bought real estate even through the 90’s and early 2000’s. He’s held gold/silver and is constantly waiting for the “explosion” and end of the fiat currency. He thinks he’s going to be able to exchange his gold for food when everything goes to pot. Really? I tell him if things get that bad, do you think you’re going to make down to the store alive to buy anything? I don’t think so. So many lost opportunities for my old friend living and thinking this way. I can only imagine the money he’d have if he’d just invested in a balanced portfolio. It’s also just not fun to be around these people- waiting for the apocalypse…
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truly a sad bunch. always quoting zerohedge and alex jones lol

“Do you honestly believe ‘inflation’ (or whatever bastardized measure of it they accept as CPI) is sub 2 % while cost of living actually increases by 8 % + annually?”

Inflation in Canada is 2%…….unless you want to buy a house, then it has been 20% annually until last year, now about 5-10% negative depending on where you are purchasing…..or gasoline, goes up about 15% per year (but we have Doug Ford now who promises to reduce it by ten cents per liter, at least until Justin puts it back up again with his own gas tax)……or groceries….unless you want to buy vegetables or fruit (10% average increase per year) or meat (8% increase per year) or dairy products (whatever the Dairy Board decides, usually about 8-10% per year but can be a lot more)……or if you want to purchase a car (about to go up by as much as 50% depending on how bad Trump’s auto tariffs hit us)………or if you are in the market for a condo (about 20-30% per year increase, about to be a lot more due to the new steel tariffs which make the steel that they are built out of very expensive – and it is not produced in Canada)……

I have heard that grass seed has gone down in price.

Oh and we might get “buck a beer” in Ontario.

Yeah, 2% annual inflation in Canada. That will be the day (that pigs fly and elephants wear ear muffs).

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Cars seem to be the one major consumer good that have remained at or below inflation over the past 10-20 years.

The new Honda Civic I bought in 2007 would cost about the same today, for the correspondingly new 2018 model, assuming same features while allowing for technological upgrades one would expect over 11 years.

#161 Tater on 07.06.18 at 8:43 am
#93 Sonia in Salmon Arm on 07.05.18 at 8:41 pm
I’ve checked out your blog over the years. A few years back you were at least partially warm to gold, now seems you won’t touch it. In 2002 I sold some bonds (10 %) of my portfolio and bought 100 Canadian Gold Maples at an average cost of abt 345.00 US. I put them away in my safe deposit box and today they are worth approx. $132,000.00 US. Seems to me they were a pretty good investment. And, if sold a certain way (legal) no capital gains…

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So, about an 4% CAGR in CAD terms. While XIU returned 7.3% annually over the same time period. Not sure that’s really a pretty good investment.

Much of the gains were in forex, remember. – Garth
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She’d have been buying USDCAD in the mid 1.55’s and selling it now at 1.30 ish. The FX was a loss (forex is a word only for punters)

I totally disagree with this post…
China, Russia, Turkey, India and other CB’s are buying up all the worlds gold for a reason.
Even Germany has repatriated its good from the IS for a reason.
Gold is Insurance for your wealth.

If cost of living increased by 8% over the last 10 years, the average person’s standard of living would have been cut in half. That hasn’t happened.
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Indeed, if anything, folks seem to have more money to blow than ever. On the weekends all I see are Harleys, reverse trikes, and old classic cars driving around. Boats crowd all the waterways, and new houses being built all over the place.

IMHO, two opposing forces are at work. The cost of government and the base necessities of life are constantly going up.

At the same time just about all consumer goods are lower than they have ever been, with more choice than ever – thanks to globalization and technology.

They may “net out” together as only a slight increase in the overall costs of living depending on how much you are giving to each side. It almost seems that taxes have expanded to usurp any surplus cash the workers may have gained from the cost reductions in consumer goods. Maybe the “effective net inflation” is not much changed – just a bigger slice of pie going to the government.

The other wild card definitely playing a role in all this is cheap money, and easy credit (for now).

Trudy was telling the people that the biggest problem with the Conservative Government was Harper’s facial expressions. I find this a bit odd coming from Mr. Dress Up.
I will not allow any more references to ‘Trudy.’ He is the prime minister. Disagree all you want, but mocking is childish and overly disrespectful. – Garth
…

You’ve called him Mr. dress-up….

“Meanwhile Mr. Dressup’s recent budget inspired nobody with its gender equality talk while stringing out deficits as far as they eye can see. Sadly there is no plan. ”

Well if that were true Garth it really should not be of any interest or concern of politicians or people in the financial industry what the price of gold or silver is. Price management and short selling should not be a priority or a common and persistent practise. The best way to keep people from being interested in the stuff would be to make the price so high that only the elites could pay for it leaving everyone else to invest in other things with the official currency…. Make buying a home in TO cheaper than to buy an ounce of silver for example…

What is going on with Trudeau? Shirtless jogging and well photographed with six RCMP Yukons just out of frame. A military photo op to Latvia? ????? And now an ackowlegment that he’s sent our boys to a certain death in Mali…..and that they should be prepared to die?

Trudeau wants us to think he’s a battle hardened veteran of Trump’s War? Is Gerald Butts insane? What Security Council seat or election ploy is worth a single Canadian in a thousand year religious civil war in a country Trudeau couldn’t have found on a map?

Does Trudeau really think this PR nonsense is going to play? We love Canada…..but we don’t love you …..Junior ….and no amount of bare chested foppety will make us forget you molested that girl
……we are owed an apology and……your absence.

TV/electronics is also ‘at or below inflation’, the question is how much of your expenses is on cars and electronics.

My guess is: less than 3-4 %?
Note that new cars and electronics are entirely discretionary expenses. (you can buy an old car if you need a car at all)

The rest of consumer goods (those that you need) is constantly going up, as well as the necessary/non-discretionary services.

In my mind inflation is already horrendous.
The ‘good news’ is that the intellectual monkeys at BoC might raise rates a few times but in the big scheme of things – CPI vs cost of living, it is a very bad outlook going forward.

Thinking in perspective: how much would your ‘CPI indexed’ CPP even if maxed out help you subsistence?
Would you be able to live even a week on that monthly ‘pension’?

Thinking about entire generation, maybe few of very, very poor retirees. Robbed. Lied to. Left to die in poverty.

While some enjoy their french villas, trust funds and nice jobs for their kids on Bay Street.

When you borrow 500k for a house that is *not* central bank money. It’s credit which is fungible.

So when housing is going up and rates are going down banks are, in practice, only constrained by borrowing demand. As we know that’s pretty limitless.

From the Bank of England official blog linked above (which itself is from a BoE paper):

> To summarize, banks are not intermediaries of real loanable funds, they do not collect new deposits from non-bank savers. Instead they provide financing, they create new deposits for their borrowers. This involves the expansion or contraction of gross bookkeeping positions on bank balance sheets, rather than the channelling of real resources through banks. Replacing intermediation of loanable funds models with financing and money creation models is therefore necessary simply in order to correctly represent the role of banks in the macroeconomy.

The upshot of this is that banks can always issue credit in order to capture productivity gains through land.

We are far more productive today than 1960. In 1960 one parent working could pay for a home, a stay at home mom (or dad!).

Today we need two incomes to pay for the exact same home. That’s life after the gold standard (not that I want this back but I do want the bankers reigning in).

What’s *not* included into inflation stats? Land costs. The cost of *money* is included via mortgage costs.

What do banks issue credit against the most?

Housing.

So we have a speedometer that is linked to your radio volume. By design.

Items such as electronics are naturally deflationary and the BoC (and BoE) continuously shuffle in new tech into the basket which will of course deflate as the technology matures. Once it’s stopped falling in price it is replaced by something “newer”.

Flat screen TVs are discretionary. I’ve not bought one in nearly 10 years.

But I have to pay the bankers via their distributed debt collectors (landlords) every day of the year.

The current description of the system is so poor it’s hard to believe it’s incompetence.

In addition to the price, the meal was downsized to approximately 70 % of the original with much smaller plates. God/Allah/Buddha knows how much the quality of ingredients changed.

So how much do you say the annual inflation is?
2 % or 8 %+

Look at the cost of electricity, more than doubled in the last 3 years alone.

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Citing one of the hundreds of components, and one that is only 1.2% by weight, is definitely inflation for dummies.

It’s almost like CPI has a number of components, some of which have gone up and others that have gone down.

The idea that people have had their purchasing power cut in half and have filled the gap with borrowing is absurd. If that were the case, after a decade, they’d be borrowing an amount equal (ish) to their salary. Annually.

There’s a famous saying that ‘an ounce of gold bought you a nice suit 100 years ago, and still can today’. The same can’t be said about however many paper dollars of any currency it required to buy said nice suit in 1918. Gold is not money. It’s a store of wealth.

That ‘store of wealth’ has lost 30% of its value in eight years, pays nothing and costs to own. – Garth

I don’t think anyone needs to ridicule Justin Trudeau, as he seems to do a magnificent job of achieving that goal, entirely by himself.

The “male feminist”, “people kind”, his behaviour on his trip to India, where the Indian press had a field day afterwards. etc ………..the list goes on and on.

For many Canadians there is no doubt whatsoever, as to what they think of him, regardless of the fact that in a non-PC world they keep quiet about it. For others I expect, they view this type of conduct as appropriate.

We will have to wait and see as to whether, the people of this country will re-elect this guy or not. It will be a very critical leading indicator as to which direction we a nation are going to head towards.

And this is what we should be concerned with, not the guy down south, who for better or worse, does not lead us.

“around the world have been calculated to be I will use the words” rigged or influenced””

“the vast scale of election interventions by both the US and Russia. There have been 117 “partisan electoral interventions” between 1946 and 2000. That’s around one of every nine competitive elections held since Second World War. The majority of these, almost 70 per cent, were cases of US interference. And these are not all from the Cold War era; 21 such interventions took place between 1990 and 2000, of which 18 were by the US. 60 different independent countries have been the targets of such interventions.”

“The targets came from a large variety of sizes and populations, ranging from small states such as Iceland and Grenada to major powers such as West Germany, India, and Brazil. It’s important to understand that these cases vary greatly – some simply involved steps to publicly support one candidate and undermine another. Almost two thirds of interventions were done in secret, with voters having no idea that foreign powers were actively trying to influence the results.”
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DL: “One in nine elections”

“Dov Levin, an academic from the Institute for Politics and Strategy at Carnegie Mellon University, has calculated”

“the vast scale of election interventions by both the US and Russia. According to his research, there were 117 “partisan electoral interventions” between 1946 and 2000. That’s around one of every nine competitive elections held since Second World War. The majority of these – almost 70 per cent – were cases of US interference. And these are not all from the Cold War era; 21 such interventions took place between 1990 and 2000, of which 18 were by the US. “60 different independent countries have been the targets of such interventions,”

“Levin’s writes.”

““The targets came from a large variety of sizes and populations, ranging from small states such as Iceland and Grenada to major powers such as West Germany, India, and Brazil.” It’s important to note that these cases vary greatly – some simply involved steps to publicly support one candidate and undermine another.
But almost two thirds of interventions were done in secret, with voters having no idea that foreign powers were actively trying to influence the results.”

“The practice of taking someone else’s work or ideas and passing them off as one’s own”
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JB: “God bless America was in response to the Irvin Berlin story in case you didn’t read it?”
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JB: “anyone who sings it should remember that it began as — and at root will always be — a love song to this country from an immigrant grateful to have been given a chance at a new life.”

“теперь понимаешь?”
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What I understand is, your indoctrination must run deep to be celebrating this type of propaganda, 100 years after the fact.

The Americans had a law to end phone spoofing (fake caller id numbers showing up from your phone call hiding your real number). Then some lobbyist took it to court and struck it down on the fake premise that women should be able to lie about their phone numbers for safety reasons.

No doubt this was not the real reason for taking it to court.
The whole Fraud industry was going to take a massive hit from “Honesty”.

JB: “One in nine elections”
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Straight out of history, a fact is a fact. Did I say it was mine. The facts are what they. If I had the time to read back all of the books Ive read you and I would both be retired. BTW Berlin would today denied entry and or declared an illegal alien and deported.

Newspaper in Toronto that has been in business for decades has the video up on its hard drive. Never kill the messenger, because the message is clear. The truth reigns supreme, and must be upheld, or all will be lost in the white noise insanity.

Why does our weak and pathetic government allow phone calls from fraud artists?

There used to be a govt registry that you could sign up for that would “eliminate” unwanted phone calls. I signed up … never did work, kinda like the long gun registry. Just hope it didn’t cost us quite as much.

#198 NEVER GIVE UP on 07.06.18 at 1:53 pmI get daily tax fraud calls that wake me up, interrupt my dinner etc.
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The one I get is even more annoying since it’s useless. Same robocall about my federal(American) student loans every single day from a different spoofed number with my area code. I can’t let calls go to voicemail as it is a business line.
I’ve never been to an american school of any kind. When I asked to be added to the “do not call” list she said there is no such thing. When I explained that I don’t have a student loan she said “Well tough, let’s do this again tomorrow.” and hung up on me.

The idea that people have had their purchasing power cut in half and have filled the gap with borrowing is absurd. If that were the case, after a decade, they’d be borrowing an amount equal (ish) to their salary. Annually.

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They spend the same amount, an ever increasing part of it borrowed, on much less goods that are increasingly more expensive.

GDP grows at 1.5-2 %, real inflation is 8 %, you spend continuously more, a lot of it borrowed on much less goods.

Which part of Inflationary depression that follows the biggest credit bubble in the history of the world is not clear to you?

The idea that people have had their purchasing power cut in half and have filled the gap with borrowing is absurd. If that were the case, after a decade, they’d be borrowing an amount equal (ish) to their salary. Annually.

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They spend the same amount, an ever increasing part of it borrowed, on much less goods that are increasingly more expensive.

GDP grows at 1.5-2 %, real inflation is 8 %, you spend continuously more, a lot of it borrowed on much less goods.

Which part of Inflationary depression that follows the biggest credit bubble in the history of the world is not clear to you?
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Bob makes 100k per year and spends all of it. His wage grows 2%, but cost of living goes up 8% per year. To maintain his standard of living, how much does Bob have to borrow in 10 years to fund his lifestyle 10 years from now?

The answer is 93k.

You don’t even realize that CPI components are weighted by typical consumption. Seriously, maybe do some reading, not from conspiracy sites, and learn a little bit. Because right now, you’re just ranting away about nonsense.

Mankind may sport some of those traits attributed to intelligence but our short-sighted view of the future and the desire to continually inflict harm upon ourselves brings into question man’s ability to reach the next level. The Peter principle is a theory built around a person being promoted until they can no longer perform effectively.

Simply put, “managers rise to the level of their incompetence.” At this point, they begin to muck up the works and become part of the problem. The question here is whether mankind will be halted by the same dilemma. The article below delves into whether mankind is hitting a natural barrier to moving forward.

#47 No Cigar on 07.05.18 at 6:25 pm
#27 Howard – You guessed wrong, and the 12% in the 6th year only pertains to income earned in the country, but if one desires to file in Canada a tax credit will be provided. The Smoking Man would love this place because the casinos are everywhere just like Vegas. One man from USA in comments stated, this place is great because all the drinks are free no matter where I go.
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Casinos? It’s gotta be Macau!
Don’t forget to try the egg tarts.

The views expressed are those of the author, Garth Turner, a Raymond James Financial Advisor, and not necessarily those of Raymond James Ltd. It is provided as a general source of information only and should not be considered to be personal investment advice or a solicitation to buy or sell securities. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor's circumstances and risk tolerance before making any investment decision. The information contained in this blog was obtained from sources believed to be reliable, however, we cannot represent that it is accurate or complete. Raymond James Ltd. is a member of the Canadian Investor Protection Fund.